It says something about Joshua Oppenheimer’s exceptional, gruelling documentary that by the time an ex-member of a death squad cheerfully volunteers this information, about two-thirds of the way through, I was wondering whether I should note it down. The torrent of appalling attitudes and admissions vouched so far had already filled several pages of my notebook, and I began to feel an irrational notion that ink and paper, no matter how much I had, would run out before the horrors would.

In Medan, Indonesia, in the 1960s, Anwar Congo and his pals were gangsters scalping cinema tickets, the biggest sellers being American films, which the communists were attempting to boycott. In 1965, the government is overthrown by the military. Congo and pals are promoted to paramilitary death squad leaders and take revenge for the red interference in their cash flow by slaughtering, and assisting the army to slaughter, over a million alleged communists, fellow travellers and Chinese people.

Today Anwar Congo is a snappy dresser, an ageing dandy with a few dance moves left, and Oppenheimer, stymied by the powers-that-be to make a film about the victims of the massacre, decides in a move of perverse genius to turn his cameras on him and the other perpetrators. Appealing to their vanity, he offers to make a film about the glory days of 65, in which Anwar and various now pot-bellied racketeers will star as themselves, re-enacting the events in whatever genre or mode they see fit. The feature as they imagine it will never be made, but it gives Oppenheimer a way, amidst the dance routines and dream sequences, to get them to rake over and discuss what they have done, and to get them to state it on camera, for the record. Which they do, at length, blithely and with little sense of remorse or self-preservation, happy to recreate scenes of torture and execution and the destruction of whole villages with one eye on the international box office. They chat about the difficulty of beating hundreds to death, and their relief when a less strenuous, though still very hands-on method of strangulation is devised, involving chicken wire and a wooden handle. They rope in family and friends, quiet down their grandchildren, who cry when the action upsets them, and never seem to realise that it should.

This openness is one of the most fascinating and strange aspects of The Act of Killing. It takes a while to realise that we, the filmmakers and Anwar himself are in a bubble, an echo chamber of self-justification. The media and government are on Anwar’s side, as his side won, and decades down the line they are still in power, still shaking down the population for protection money, their version of history officially endorsed over the years. We hear the line ‘gangster means free man’ over and over again from different sources, reinforcing the idea that the military, and paramilitary (The Pancasila Youth), were the country’s saviours. It would never occur to them to be cagey about admitting to rape and murder, because they have come to believe their own bullshit. The viewer, however, becomes alert for hints of the counter-story, the body language of unease, the true emotion bursting through the artifice. We watch the squirming of an ‘actor’ around the ex-death squad in a movie studio as he raises the subject of his stepdad’s abduction and murder, and then jumps through hoops to avoid implying that the death was anything other than justified. We see the TV engineers in the back room discussing Anwar: ‘He must have killed a thousand people… How does he sleep at night?’

Badly, it turns out, for Anwar suffers nightmares, and it’s a large part of the film’s power that he does so. He may voice the self-serving bluster like the rest of the boys most of the time, but something in his body is rebelling, sending him into dry heaves on the rooftop where he killed in 65, sending him into some kind of nervous attack when he tries to re-enact another torture scene. Over the length of the film we follow his halting progress towards the idea that, in murdering countless people on little or no evidence of wrongdoing, he might have done a bad thing. He agonises over this idea, so simple for us to understand. At first, he watches the rushes of yesterday’s barbarism only to criticise his choice of pants, and to realise that he needs to dye his hair, calling in his kids to watch, but later he looks distinctly queasy. In his moments of realisation The Act of Killing reaches its moments of transcendence.

Also under the spotlight, uncomfortably, I would guess, for many critics, is the complicity of cinema in all this horror. The film within a film that Oppenheimer is making is a garish, ugly thing, a parade of grotesque make-up effects, uncomfortable dancing girls, panto costumes and haphazard production values, but we are reminded that the gangsters were inspired by the movies. They state that they wanted to be as sadistic as the characters they saw on screen. Congo’s favourite stars are Brando, Pacino and John Wayne. Fantasy violence fed into real life atrocity, black market cinema tickets gave the death squads a motive for murder, and the lure of a film camera brings them out to go through it all again. Hooray for Hollywood.

It’s another strand in a singular documentary that asks much of us. One hundred and sixteen minutes is a long time to feel this uncomfortable, yet I’m damned if I know what I would cut out in a film that leaves you gasping right up to the end titles, where a sea of ‘anonymous’ credits for the Indonesian crew remind you that there may be a price to pay for all this candour. It’s not an ‘authored’ film, you are not led by the hand through its moral maze. It’s not tightly shaped, and it is, at times, wilfully strange – there’s a version of Born Free you won’t forget in a hurry. The questions it raises about power and truth and complicity and the lies we tell ourselves will windmill through your mind for long after viewing. Werner Herzog and Errol Morris produced the film, and it’s up there with the best of their work. If I see a more extraordinary film this year I’ll be very surprised. Go. Watch it. Please.